Summary : CBDT Notification No. 141/2026 dated 4 November 2026 creates a narrowly defined withholding-tax relief under the Income-tax Act, 2025. An International Financial Services Centre unit primarily engaged in aircraft leasing may pay or credit eligible dividend income to another IFSC unit primarily engaged in aircraft leasing without deduction of tax, but only after the payee furnishes Form No. 1(N) for the relevant tax year. The payer must retain the declaration, stop deduction only for payments made or credited after receipt, and report every non-deducted payment in the prescribed TDS statement. The notification is deemed effective from 1 April 2026, yet the procedural trigger remains receipt of a complete declaration. This guide separates income eligibility from the withholding process, maps payer and payee controls, and highlights evidence, cut-off and correction issues for Tax Year 2026-27. It does not extend the relief to other IFSC businesses, non-IFSC entities or dividends that are not eligible under Schedule VI.
- Notification 141/2026 Creates a Conditional Withholding Relief
- Form 1(N) Is a Tax-Year Declaration, Not a Permanent Certificate
- Identity and IFSC Unit Details
- Business and Exemption Assertions
- Signature Authority
- The Payer Must Apply a Receipt-Date Cut-Off
- Non-Deducted Payments Still Belong in the TDS Statement
- Retrospective Effect Requires an Evidence-Led Review
- Governance File for Payee and Payer
- Frequently Asked Questions
- When did Notification 141/2026 take effect?
- Does it cover every dividend paid by an IFSC unit?
- Can the payer stop TDS before receiving Form 1(N)?
- Is one Form 1(N) valid forever?
- Who signs Form 1(N)?
- Must a no-TDS dividend still be reported?
- Can past TDS simply be paid back by the payer?
- Does Form 1(N) prove all tax exemption conditions?
- Key Takeaways
Notification 141/2026 Creates a Conditional Withholding Relief
Notification No. 141/2026, published as S.O. 6016(E), was issued on 4 November 2026 under section 400(1) read with Schedule VI, Table serial number 11, of the Income-tax Act, 2025. It specifies that no tax is to be deducted under section 393(1), Table serial number 7, from an eligible dividend paid by one qualifying IFSC aircraft-leasing unit to another qualifying IFSC aircraft-leasing unit. The notification is deemed to have come into force on 1 April 2026. That retrospective effective date does not erase the conditions attached to the relief.
The measure is not a general IFSC dividend exemption and is not a blanket instruction to reverse every deduction made since April. The payer, payee and income must each fit the notification. The payee must furnish the prescribed statement-cum-declaration for the tax year in which the eligible dividend is payable. The payer acts without deduction only after receiving the form and must report the affected payments. Any historical review should therefore reconstruct the dates of declaration, credit and payment before considering a correction.
| Condition | Required fact | Primary record |
|---|---|---|
| Payer status | IFSC unit primarily engaged in aircraft leasing | Unit approval and current business evidence |
| Payee status | Company that is an IFSC unit primarily engaged in aircraft leasing | Registration, PAN and activity evidence |
| Income | Dividend eligible under Schedule VI, Table serial number 11 | Board record, entitlement and tax analysis |
| Process trigger | Form 1(N) received for the relevant tax year | Dated declaration and receipt control |
| Payer reporting | Non-deducted payments included in the TDS statement | Section 397 statement and reconciliation |
Form 1(N) Is a Tax-Year Declaration, Not a Permanent Certificate
Identity and IFSC Unit Details
Part A of Form 1(N) requires the declarant’s name, PAN, the full name and address of the IFSC unit, contact number, email address and the relevant tax year. The address must contain the prescribed geographic and premises details. Some information may be pre-filled, but pre-filling does not transfer responsibility for completeness or accuracy. The payee should reconcile the form to its PAN record, IFSC approval and corporate records before signing.
Business and Exemption Assertions
The declaration states that the payee unit is engaged in aircraft leasing and that its dividend income is eligible for exemption under Schedule VI, Table serial number 11. It also states that the unit continues to operate in the IFSC and continues the aircraft-leasing business during the tax year covered by the declaration. These are substantive assertions. A generic group profile or an old approval letter is not enough if current operations or the particular income remain unclear.
Signature Authority
The form must be verified by a person competent to sign the return of income under section 265 of the Income-tax Act, 2025. The signatory’s name, capacity, designation, place and date should be recorded. The payee should preserve the board authority, power of attorney or organisational authorisation supporting that capacity. An unsigned draft, email confirmation or declaration signed by an unauthorised employee should not activate the payer’s no-deduction control.
The Payer Must Apply a Receipt-Date Cut-Off
The notification directs the payer not to deduct tax on a payment made or credited after the date on which it receives the payee’s Form 1(N). The operative control therefore needs at least three dates: form receipt, dividend credit and dividend payment. Where credit precedes receipt but payment follows it, the earlier-of-credit-or-payment principle and the notification wording must be analysed carefully. The payer should obtain transaction-specific advice instead of assuming that a later declaration cures an earlier withholding event.
A defensible process time-stamps the form when received, validates mandatory fields and supporting evidence, and then releases a system instruction for eligible future entries. The tax team should approve the instruction, and accounts payable should not rely on the payee’s oral assurance. If the form is defective, the payer should record the query and keep normal deduction logic active until a compliant form is received.
| Sequence | Control action | Risk if omitted |
|---|---|---|
| Before receipt of Form 1(N) | Apply ordinary section 393 analysis | Under-deduction and interest exposure |
| On receipt | Validate payee, unit, tax year, eligibility and signature | Reliance on an invalid declaration |
| After approval | Tag only eligible dividend payments or credits | Over-broad relief across other income |
| Quarter-end | Reconcile ledger, declaration register and TDS statement | Omitted or mismatched reporting |
| Year-end | Renew tax-year evidence and preserve audit trail | Stale declaration used in a later year |
Non-Deducted Payments Still Belong in the TDS Statement
The payer must furnish particulars of every payment on which tax was not deducted by reason of the notification in the statement referred to in section 397(3)(b), read with rule 219 of the Income-tax Rules, 2026. No deduction does not mean no compliance. The return-preparation file should identify the payee, PAN, amount, date, nature of income, no-deduction basis and declaration reference in the format required by the portal and current filing utility.
A quarter-end reconciliation should start with the dividend ledger and board-approved distribution, trace each eligible line to the Form 1(N) register, and then trace it into the TDS statement. Differences may arise because of credit dates, multiple tranches, rounding, rejected PAN data or payments outside the narrow notification. Corrections should preserve the original filing and evidence of the revised statement; they should not be resolved by silently changing the internal register.
Retrospective Effect Requires an Evidence-Led Review
Because the notification is deemed effective from 1 April 2026, an eligible unit may need to review dividend events earlier in Tax Year 2026-27. The explanatory memorandum states that no person is adversely affected by the retrospective effect. Even so, an operational review must distinguish tax already deducted and deposited, tax deducted but not deposited, payments credited before the declaration, and payments occurring after valid receipt. Refund or correction mechanics depend on the precise facts, statutory process and portal functionality.
The notification does not authorise a payer to refund TDS informally from its own funds or to net it against unrelated liabilities. Any correction should reconcile challans, statements, certificates, the payee’s tax credit and the payer’s books. Legal and tax teams should approve the treatment, especially where a declaration was not available on the original credit date.
Governance File for Payee and Payer
- Confirm that both units are located in an IFSC and primarily engaged in aircraft leasing.
- Document why the particular dividend is eligible under Schedule VI, Table serial number 11.
- Obtain a fresh Form 1(N) for the relevant tax year and verify the authorised signatory.
- Record form receipt before changing the withholding instruction for eligible transactions.
- Restrict the no-deduction tag to the named payee, qualifying unit and dividend income.
- Report every non-deducted payment in the applicable TDS statement and retain the reconciliation.
- Review pre-notification events separately and use formal correction or refund processes where applicable.
Frequently Asked Questions
When did Notification 141/2026 take effect?
It is deemed to have come into force on 1 April 2026, although it was dated 4 November 2026.
Does it cover every dividend paid by an IFSC unit?
No. Both units must satisfy the stated IFSC aircraft-leasing conditions and the dividend must be eligible under Schedule VI.
Can the payer stop TDS before receiving Form 1(N)?
The notification links no deduction to payments made or credited after receipt of the payee’s statement-cum-declaration.
Is one Form 1(N) valid forever?
No. The form identifies the tax year in which the eligible dividend is payable.
Who signs Form 1(N)?
A person competent to sign the return of income under section 265 of the Income-tax Act, 2025.
Must a no-TDS dividend still be reported?
Yes. The payer must furnish the payment particulars in the prescribed TDS statement.
Can past TDS simply be paid back by the payer?
No automatic informal refund follows. The parties should use the applicable correction or refund process after transaction-specific review.
Does Form 1(N) prove all tax exemption conditions?
It is necessary for the notification, but the payer should still document the status of the units and eligibility of the income.
Key Takeaways
- The relief is limited to eligible dividends between qualifying IFSC aircraft-leasing units.
- Form 1(N) must identify the relevant tax year and be signed by an authorised person.
- The payer should apply a receipt-date cut-off and retain transaction-level evidence.
- Every no-deduction payment must still be reported in the prescribed TDS statement.
- Retrospective effect calls for formal reconciliation, not an automatic or informal refund.
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Disclaimer: This article is a general editorial explanation of CBDT Notification No. 141/2026 dated 4 November 2026 and Form No. 1(N), checked against official material on 7 November 2026. It is not a legal opinion, tax opinion, withholding certificate, confirmation of Schedule VI eligibility, refund claim, correction statement, IFSC approval or substitute for the Income-tax Act, 2025, the Income-tax Rules, 2026, the Special Economic Zones Act, 2005, applicable IFSC regulations, portal specifications, payer contracts or later directions from CBDT or the Directorate of Systems. The no-deduction treatment depends on the legal status and continuing business of both units, the nature and eligibility of the dividend, the relevant tax year, the timing of credit and payment, the date a complete and valid declaration is received, the authority of the signatory, and accurate statement reporting. Retrospective commencement does not necessarily cure a deduction event that occurred before a compliant declaration, and it does not authorise an informal refund, adjustment or reversal. Payers and payees should preserve the complete evidence chain, reconcile TDS statements, challans, certificates and tax credits, and obtain advice from qualified tax, legal and IFSC professionals before changing withholding or correcting a prior period. They should verify later notifications, procedures, utilities and reporting fields immediately before filing. TaxGuru accepts no responsibility or liability for any under-deduction, interest, penalty, rejected form, reporting mismatch, refund delay, loss of exemption, regulatory consequence or other result arising from reliance on this article, incomplete records, a later change in law or a difference between this summary and the governing documents.
